Sustainability criteria have been fully incorporated into the management and selection process for Group suppliers.
The supplier selection process is based on objective assessment criteria aimed at ensuring impartial treatment and equal opportunity for all parties involved. Quality, supply, price and the ability to meet delivery times represent just a few of the areas upon which suppliers are evaluated.
The new procedures implemented in 2009 introduced specific standards relating to environmental and social sustainability. As a result, clauses are being progressively introduced to new agreements requiring that suppliers adhere not only to the Group Code of Conduct but also to specific Sustainability Guidelines.
If it is found that a supplier fails to adhere to these principles, the Group reserves the right to terminate the business relationship or require the supplier to implement a corrective action plan, which is then verified by audit.
The Sustainability Guidelines are available on the website. These guidelines, which also apply to subcontractors, require adherence to the following principles:
- Human rights and working conditions:
- rejection of the use of forced or child labor in any form
- recognition of the right to freedom of association in accordance with the applicable law
- safeguarding of employee health and safety
- guarantee of equal opportunities, fair working conditions and the right to training for employees
- Respect for the environment:
- optimization of the use of resources
- responsible waste management
- elimination of potentially hazardous substances from the manufacturing process
- development of low environmental impact products
- use of an environmentally sustainable logistics system
- Business ethics:
- high standards of integrity, honesty and fairness
- prohibition against corruption and money laundering
New shared Sustainability Guidelines will be adopted in 2012 across the Group.
The Potential Supplier Assessment system was enhanced in 2011 with additional assessment criteria relating to sustainability. The changes introduced include the requirement to adopt a Code of Conduct or a Code of Ethics governing issues such as respect of human rights and anti-corruption measures, as well as a certified Health and Safety Management System in addition to the previous requirements for a certified Environmental Management System.
A further step towards fully integrating environmental and social aspects in the management of suppliers will be taken in 2012. At that time the supplier sustainability performance (assessed through both self-assessment questionnaires and on-site audits) will be a determining factor in the final decision for the award of supply contracts. The result is already included in the score that impacts sourcing decisions for Chrysler Group suppliers.
In order to verify adherence by suppliers to the Group’s sustainability standards and, where necessary, take steps for improvement and realignment, Group Purchasing has in place a monitoring process that consists of two main tools: self-assessment questionnaires on sustainability standards and follow-up on-site audits.
The questionnaire queries suppliers on human rights; environmental and health and safety practices; ethics and anti-corruption; and people training and development. It also serves as a gap analysis tool for suppliers, highlighting areas that need improvement.
In 2011, self-assessment questionnaires were answered by about 1,235 suppliers accounting for roughly a further 37% of purchases by value managed by Group Purchasing during the year. This was in addition to the 362 suppliers already taking part in 2009 and 2010. Suppliers who completed the questionnaire attained an average score of 87/100.
An analysis of the results essentially confirmed the previous year’s findings of widespread implementation of good social and environmental practices: a significant proportion of suppliers have their own environmental and social management system, set targets in these areas and prepare periodic reports.
Following the self-assessment process, audits were conducted on a selection of key suppliers. Continuing last year’s activities, a further 51 audits were performed in Europe, China and India. These audits did not reveal any particularly critical situations: no contracts were suspended or canceled and no suppliers were placed on watch status. However, corrective action plans for certain areas considered in need of improvement were formulated in collaboration with suppliers. In 2011, as a result of the audits conducted, a total of approximately 70 joint action plans were initiated for about 40 suppliers.
Also involved in the formulation of these plans was the Supplier Sustainability Committee set up within Group Purchasing. The committee is composed of the Compliance Officer, General Counsel and the head of Supplier Quality Engineering. The plans primarily addressed the need to develop standards in the areas of corporate governance and human rights, in particular the adoption of a Code of Conduct, the appointment of a sustainability officer and the promotion of responsible behavior within their own supply chain.
The level of a supplier’s compliance and the action plans required are reported in the Supplier Quality Performance system. These results can be viewed by all employees assigned to managing suppliers.
In 2011, a risk map was prepared to identify the critical suppliers whose compliance with sustainability criteria requires evaluation. The four risk drivers used to create the risk map were: supplier turnover; country risk associated with the supplier’s location, focusing on countries with poor human rights records; supplier financial risk; and the outcome of the assessment of the supplier’s adherence to the principles of sustainability conducted in previous years through self-assessment questionnaires and/or on-site audits. The risk map classifies suppliers according to three levels of risk: high, medium and low.
(1) Data includes Chrysler Group for the full year.
(2) Data refers to Fiat Group pre-demerger and accordingly includes Fiat Industrial and not Chrysler Group.
(3) Value of direct material purchases managed by Group Purchasing. 
